PayPal’s ambitious plans for stores

PayPal, the online payments unit of eBay Inc., has pilot projects in development with 16 retailers meant to make shopping easier and more rewarding—including through PayPal-driven loyalty programs—for their customers, the company says. “It’s all about making things easier and more valuable for consumers and for our merchants,” says Don Kingsborough, PayPal’s vice president of retailer and emerging markets.

At more than a dozen retail chains including The Home Depot Inc., Guitar Center and Toys ‘R’ Us Inc., PayPal is rolling out payment terminals that let consumers pay by either entering the same login and password they use for PayPal online, or by swiping one of three payment cards co-branded by PayPal and MasterCard: a debit card or prepaid card linked to a consumer’s PayPal stored-value account, or a PayPal Extras MasterCard credit card, which is issued by GE Capital Retail Bank. Consumers can use those cards wherever both PayPal and MasterCard are accepted. PayPal won’t say how many of the co-branded cards have been issued. For small retail shops or street vendors, a service called PayPal Here enables retailers to modify mobile devices with PayPal card readers to also accept PayPal transactions.

The Home Depot is No. 42 in the Internet Retailer Top 500; Guitar Center is No. 44 and Toys ‘R’ Us is No. 29.

And there’s more to come, PayPal says. Another project focuses on making PayPal the way consumers pay in stores with their mobile phones. In this arena, PayPal takes on payments processor Square Inc., whose mobile payments app is building a base among small retailers and which recently landed a nationwide deal with the Starbucks Coffee Co. chain. PayPal is piloting a mobile app that lets a consumer click an icon on her mobile phone of a participating retailer before walking into a store, causing her account information and her photo to appear on a store cash register screen. The clerk would recognize the customer by her photo, and process her payment without the customer having to present her phone.

That stand as just one of the pilot projects PayPal has crafted with 16 major retail chains that operate some 17,000 store locations, Kingsborough says. Although PayPal won’t release many details on those projects until later in 2013, the company says they will build on PayPal’s mobile technology and loyalty program, enabling retailers to reward customers with electronic loyalty points they can redeem while using PayPal to complete a purchase. “We’ll be taking information from these projects and use what works best,” Kingsborough says.